Gold futures on the Multi Commodity Exchange (MCX) slid to Rs 1.50 lakh per 10 grams on Wednesday, marking a significant decline as a surge in crude oil prices and a strengthening US dollar weighed on the precious metal. The contract for June delivery fell by Rs 1,200 or 0.79 per cent to Rs 1,50,000 per 10 grams, with a low of Rs 1,49,800 and a high of Rs 1,51,200 during the session.
Market Dynamics
The decline in gold prices comes amid a sharp rally in crude oil, which has raised inflationary concerns and boosted the dollar index. A stronger dollar makes gold more expensive for holders of other currencies, dampening demand. Additionally, rising bond yields have further reduced the appeal of non-yielding assets like gold.
Impact of Oil Surge
Brent crude futures climbed above $120 per barrel, driven by geopolitical tensions and supply disruptions. This surge has stoked fears of sustained inflation, prompting investors to pivot towards the dollar and away from gold. Analysts note that higher oil prices also increase production costs for gold miners, potentially affecting supply dynamics.
Dollar Strength
The US dollar index hit a multi-month high, supported by hawkish signals from the Federal Reserve. A strong dollar typically exerts downward pressure on gold prices, as seen in Wednesday's trade. The rupee's depreciation against the dollar also contributed to the domestic price decline.
Outlook
Market experts suggest that gold may face further headwinds in the short term. However, safe-haven demand could re-emerge if global economic uncertainties escalate. The ongoing Russia-Ukraine conflict and its impact on energy prices remain key factors to watch.
In the international market, spot gold was trading lower at $1,850 per ounce, while COMEX gold futures dipped. Domestic physical gold prices also corrected, with 24-carat gold falling to Rs 52,000 per 10 grams in major cities.
Investors are advised to monitor crude oil movements and Fed policy cues for further direction. The next support for MCX gold is seen at Rs 1,48,500 per 10 grams, while resistance is at Rs 1,52,000.
